Domestic icon Martha Stewart is in a West Virginia prison, serving a five-month sentence for lying to government investigators about a suspicious stock trade. Although her company's sales have sunk, the stock price soared in recent months -- perhaps in anticipation of a comeback through a reality TV show deal, new product lines, and the prospect of wider distribution through Kmart Holding Corp.'s (KMRT
) takeover of Sears, Roebuck & Co. (S
Meanwhile, Frank P. Quattrone, the former star tech banker at Credit Suisse First Boston (CSR
), was handed an 18-month sentence in September after being found guilty of obstructing justice and tampering with witnesses during a government investigation of the bank's activities. Quattrone, who is free pending appeal, was also barred for life from working in the securities industry.
Other high-profile defendants dodged jail time but are heading back to court. One of the most closely watched events is likely to be the retrial of former Tyco International Ltd. (TYC
) CEO L. Dennis Kozlowski and ex-Chief Financial Officer Mark H. Swartz. Kozlowski became a poster boy for excess -- with tales of his $2 million birthday party and $6,000 shower curtain during the pair's last trial, on charges of stealing $600 million from the company and shareholders. That trial ended in April with a hung jury. A new one is likely to start early this year. Kozlowski, meanwhile, has to mount a defense against charges of sales-tax evasion on art purchased in New York. Both men deny all charges.
Even Kozlowski, however, might get upstaged by the final act of the long-running Enron Corp. drama. Sometime in 2005, former Chairman Kenneth L. Lay, CEO Jeffery K. Skilling, and Chief Accounting Officer Richard A. Causey are expected to go to trial in Houston on a variety of criminal charges. They'll be defended by a platoon of high-priced lawyers -- but they'll be facing Justice Dept. prosecutors who have won six jury convictions and negotiated guilty pleas with 15 other Enron managers and advisers involved in the fiasco.
So far, the most impressive scalp collected by prosecutors belongs to ex-Chief Financial Officer Andrew Fastow. He pleaded guilty to securities and wire fraud early last year. Fastow is expected to begin a 10-year sentence later this year -- after his wife, Lea, who is currently serving a one-year term, leaves prison. The Task Force's decision to prosecute Lea Fastow certainly helped put pressure on her husband to cut a deal, and there has been some speculation that the feds may try the same trick with Lay. His wife, Linda, participates in a family charity that sold stock as Enron was plummeting, and therefore she might be vulnerable to insider-trading charges. She denies wrongdoing, as do Lay, Skilling, and Causey.
But few alleged wrongdoers have been as vigorous in mounting their defense as Richard M. Scrushy, former CEO of HealthSouth Corp. (HLSH
). Since being indicted in October, 2003, on 85 counts of fraud -- since reduced to 58 -- for which he could conceivably be sentenced to 450 years behind bars, Scrushy has mounted a furious public-relations and legal blitzkrieg. Among other things, Scrushy now funds his own TV talk show -- ViewPoint with Richard and Leslie Scrushy -- and has filed a formal complaint against the local U.S. Attorney, an FBI agent, and a Justice Dept. official, alleging they withheld evidence that would help exonerate him. He told BusinessWeek: "I am innocent of the accusations against me and have been blessed by the Lord in having the resources to confront my accusers."
Still, it will take more than good ratings and a fat wallet to battle the charges that Scrushy led a $2.7 billion conspiracy to inflate earnings and asset values at HealthSouth. A special audit review committee reported in July that they had found 20 fake bank accounts through which HealthSouth overstated cash balances by at least $373 million. Scrushy claims that five former CFOs and a bevy of accounting officials led the conspiracy. With religion, money, executive ego, politics, and betrayal expected to rear their heads, a Scrushy trial is certain to be a spectacle.
A more subdued but equally determined defendant is Bernard J. Ebbers, former CEO of WorldCom Inc., who was indicted in March on charges of conspiracy, securities fraud, and making false regulatory filings. Prosecutors allege he was the ringleader in an $11 billion accounting fraud, the largest in U.S. history. The indictment says Ebbers "knowingly and consistently" manipulated financial results to please Wall Street, although the former motel-chain operator denies wrongdoing. The prosecution's star witness is expected to be Scott D. Sullivan, WorldCom's former finance chief, who has pleaded guilty in the case and is cooperating with prosecutors. The trial is expected to kick off in January in New York.
The scandal parade isn't exclusively American. Canadian media baron and former Hollinger chief Conrad Black is facing a Securities & Exchange Commission probe, shareholder suits, and other investigations for allegedly defrauding investors and looting his company. Black is fighting the allegations and trying to take Hollinger private.
Meanwhile, former Parmalat CEO Calisto Tanzi of Italy spent 2004 fighting the law. He denies prosecutors' charges of market-rigging, falsifying accounts and obstructing the Italian stock market regulator Consob. Tanzi is now awaiting trial on those charges after having confessed to siphoning off $665 million from the $7.2 billion milk giant to a family-owned travel company. Parmalat was found to have $18 billion missing from its accounts early last year, making it one of the biggest corporate frauds in history. A slew of criminal and civil trials is set to get underway this year involving Tanzi and other top Parmalat execs, banks, auditing companies, and others. Tanzi, who suffers from ill health and is now under house arrest, faces up to 15 years in prison if convicted.
It all adds up to a full year of courtroom drama -- and, for those shareholders burned by Enron, Tyco, and the other corporate debacles, perhaps a smidgen of justice.